Direct Answer
Leidos Holdings (LDOS) is a leading US government technology contractor serving defense, intelligence, and civilian federal agencies. Originally founded as SAIC in 1969 and split into two companies in 2013, Leidos generates roughly $15 billion in annual revenue almost entirely from US federal contracts covering IT modernization, cybersecurity, health IT, and scientific services.
Leidos Holdings (LDOS) Business & Investor Dossier
Company Snapshot
| Ticker | LDOS (NYSE) |
|---|---|
| Founded | 1969 (as SAIC); Leidos name adopted 2013 |
| Headquarters | Reston, Virginia |
| Sector | Industrials |
| Industry | IT Services & Consulting |
| Business | Defense, intelligence, and civilian government IT and technical services |
| Key Segments | Defense Solutions; Civil; Health |
| Key Customers | DoD, intelligence community, DHS, FAA, VA, civilian federal agencies |
| Key Competitors | Booz Allen Hamilton, SAIC, CACI International, Parsons |
| Major Acquisition | Lockheed Martin IS&GS (2016, ~$4.6B) |
What Does Leidos Do?
Leidos is a technology, engineering, and science company that provides services almost exclusively to the US federal government. Its three operating segments serve different parts of the government: Defense Solutions handles work for the Department of Defense and the intelligence community; Civil serves civilian agencies including the Department of Homeland Security (particularly airport security systems through its TSA screening technology business), the FAA, and NASA; and Health focuses on the Department of Veterans Affairs, military health, and other health-related federal programs.
The company is not primarily a defense hardware manufacturer but rather an IT services, systems integration, and technical solutions provider. This means it writes software, integrates systems, manages IT infrastructure, provides analytics, and delivers engineering services under long-term contract vehicles.
History: From SAIC to Leidos
Leidos traces its origins to Science Applications International Corporation (SAIC), founded in 1969 by J. Robert Beyster as an employee-owned defense research company. SAIC went public in 2006. In September 2013, SAIC completed a split into two companies: one retained the SAIC name and focused on technical services and IT for defense customers, while the other became Leidos Holdings and took the solutions and technology portfolio. In 2016, Leidos acquired Lockheed Martin's Information Systems and Global Solutions division for $4.6 billion, dramatically expanding its civilian and health IT capabilities and making it one of the largest government IT contractors by revenue.
Government Contracting Economics
Government IT contracting is characterized by multi-year contract vehicles, recurring revenue from program support work, and relatively predictable but lumpy revenue as contracts are re-competed. Large IDIQ (Indefinite Delivery, Indefinite Quantity) contract vehicles give Leidos access to agency spending without requiring full competitive bidding on every task order. The cleared workforce Leidos maintains is a real and durable competitive moat -- security clearances take months to years to obtain, and maintaining a large cleared workforce creates entry barriers for potential competitors.
Frequently Asked Questions
How does Leidos make money?
Leidos makes money by providing technology, engineering, and scientific services to US federal government agencies under multi-year contract vehicles. The Defense Solutions segment serves DoD and intelligence community customers. The Civil segment serves civilian agencies including DHS (airport security systems), FAA, and NASA. The Health segment serves the VA, military health, and other health-related federal customers. Leidos is paid on cost-plus, fixed-price, and time-and-materials contract structures depending on the nature of the work. Nearly all revenue comes from the US federal government, making it relatively stable but subject to budget cycles and political dynamics.
What was the SAIC-Leidos split?
Leidos was originally founded as Science Applications International Corporation (SAIC) in 1969. In 2013, SAIC split into two separate publicly traded companies: the legacy government services business became Leidos Holdings, while the other company retained the SAIC name and focused on defense IT. The split was motivated by the belief that two focused companies could better compete for government contracts. In 2016, Leidos acquired Lockheed Martin's Information Systems and Global Solutions business for approximately $4.6 billion, significantly expanding its scale.
What are Leidos's competitive advantages?
Leidos's competitive advantages include its large cleared workforce (tens of thousands of employees with active US government security clearances), incumbent contractor relationships that are sticky through re-competition cycles, access to major IDIQ contract vehicles that allow agencies to order services without full competitive bids, technical breadth across defense/intelligence/civilian/health domains, and scale in systems integration for large federal IT programs. The cleared workforce moat is particularly durable because clearances take months to years to obtain.
What are the main risks for Leidos?
Main risks include US government budget cuts or continuing resolutions reducing agency IT spending, individual large contract losses at re-competition, protest risk delaying new contract starts, government shutdown disruptions, shifting administration spending priorities, and talent competition for cleared technical workers driving wage inflation that compresses fixed-price contract margins. Customer concentration in the federal government means that political and budget dynamics outside the company's control can materially affect revenue.
How does Leidos compare to other defense IT contractors?
Leidos competes primarily with Booz Allen Hamilton, SAIC, CACI International, ManTech, Parsons, and the federal services divisions of Northrop Grumman and General Dynamics. Booz Allen Hamilton is Leidos's most direct comparable -- both are large government IT and analytics businesses with similar revenue scale (~$14-15 billion annually) and customer mix. Leidos differentiates through its Health segment and strong position in airport security screening systems. The competitive landscape is stable among the top tier, with program managers at agencies favoring experienced incumbents with proven past performance.